Abstract
Since the relation between energy consumption and economic growth is important to design effective energy policies that will promote economic growth, this study investigates the short run dynamics and causality among energy consumption, co2 emissions, oil prices and economic growth in Kingdom of Bahrain. To do so, annual data that covers the period from 1960 till 2015. Empirical work tests for unit root, co-integration relationship using Johansen (1988) approach and then estimate both long and short run dynamics using the vector error correction model (VECM). Results indicate that there is a long-run relationship between the suggested variables. Since economic growth has a predictive power to estimate the energy demand of Kingdom of Bahrain, it is recommended that the government of Bahrain and policy designers shed the light on energy efficiency strategies and carbon emissions reduction policy in the long run without impeding economic growth in order to move towards sustainability.
Highlights
Energy is essential for economic development, it is fuels the economy from resource and material extraction to the technologies producing electricity
The general thought among international analysts and observers is that there is considerable scope for the Gulf Cooporation Council (GCC) group to contribute to global emission reductions via energy efficiency improvement and/or development of renewable energies
Given increasing global concerns on climate change, it can be expected that the GCC member states will inevitably embark on promoting energy efficiency, emission reductions and renewable energies in the near future
Summary
Energy is essential for economic development, it is fuels the economy from resource and material extraction to the technologies producing electricity. To date there has been lack of consistent and coherent policies and strategies across the GCC member states with respect to energy conservation, development of renewable energies and emission reductions. Depending on the nature of the long run relationship between CO2 emissions, economic growth and energy consumption, countries may resort to different policy options in contributing to the fight against global warming (Soytas and Sari, 2009). Evidence shows no support for the hypothesis that energy consumption is the source of GDP growth in the GCC countries Such results suggest that energy conservation policies may be adopted without much concern about their adverse effects on the growth of GCC economies. The contradictory results may occur due to the differences in data sets, characteristics of the investigated countries, variables that are included in the studies, and the diversification in using econometric methodologies (Ozturk, 2010)
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